What does an angel investor do?

February
9, 2021

3 min read

Opinions expressed by Entrepreneur contributors are their own.

Currently we hear about technology companies that have grown exorbitantly and that have acquired great importance due to the impact that their solutions have on the market. Despite the accelerated growth of these companies and the impact solutions they have, one could not speak of the impact, scaling and growth without the armed wing of private capital, specifically Venture Capital, generating an impact such that today we could see it as a solution to promote the growth and well-being of our economic ecosystem.

According to the Mexican Association of Private Capital, there are currently 126 Venture Capital investment funds in Mexico, of which 104 operate mainly with money from Mexican investors. These funds preferably invest in startups at all stages of these companies. And although many efforts have been made to promote the development of the VC value chain, there are still some that require strengthening, as is the case of angel investors.

What do angel investors do?

Angel investment is an activity that promotes entrepreneurship and innovation through the contribution of capital, mainly in startups that are in the early stages of their life cycle. Investor angels do the same job as mutual funds without being institutionalized; However, just because they don’t operate this way doesn’t mean you’re not looking for an investment return on your capital.

^{Image: Isaac Alcalá / Entrepreneur en Español}

What are the main models that exist?

Angel investors usually work independently and through angel investor networks.

If your goal is to become an angel investor, the suggestion is that you approach a network so that you make adequate investments, you know the investment theses, which are the best recommendations. A network works as a facilitating entity in bringing entrepreneurs together with high net worth individuals or families and turning them into an investment opportunity for the former. A network of angels, it shares risk and has a diversified batch of startups, says G2 Momentum Capital, a VC fund for startups.

The Mexican ecosystem has been strengthened and is on the right track; However, it is still necessary to strengthen this link in the Venture Capital chain and one of the ways is by adding networks and new angel investors.